Michalis Imellos - Chief Financial Officer, Member of Operating Committee and Member of Disclosure Committee

Analysts

Nicolas Ceron - Societe Generale Cross Asset Research

Adam Spielman - Citigroup Inc, Research Division

Edward Mundy - Nomura Securities Co. Ltd., Research Division

Olivier Nicolai - UBS Investment Bank, Research Division

Gabriela Malczynska - Barclays Capital, Research Division

Costas Theodorou - National Bank of Greece SA, Research Division

Henry Davies - BofA Merrill Lynch, Research Division

Operator

Thank you for standing by, ladies and gentlemen, and welcome to the Coca-Cola HBC's Conference Call for the 2013 Full Year Results. We have with us Mr. Dimitris Lois, the Chief Executive Officer; Mr. Michalis Imellos, Chief Financial Officer; and Ms. Basak Kotler, Investor Relations Director. [Operator Instructions]

I must also advise that this conference is being recorded today, Friday, February 14, 2014.

I now pass the floor to one of your speakers, Ms. Basak Kotler. Please go ahead.

Basak Kotler

Thank you for joining our call today to discuss our fourth quarter 2013 results. It's a pleasure to be representing the Investor Relations team on my first results call alongside management, and I very much look forward to meeting everybody face-to-face in the near future.

Today, I am joined by our Chief Executive Officer, Dimitris Lois; and our Chief Financial Officer, Michalis Imellos. Following the presentation by Dimitris and Michalis, we will open the floor to questions.

Before we get started, I would like to remind everyone that this conference call contains various forward-looking statements. These should be considered in conjunction with the cautionary statements contained in our related press release and Coca-Cola HBC AG's most recent filings, copies of which can be found on our website at www.coca-colahellenic.com.

Let me now turn the call over to Dimitris.

Dimitris Lois

Thanks. Good morning, everyone, and thank you for joining our call today. We continued to deliver on our key strategic priorities for yet another quarter. Volume returned to growth, supported primarily by a strong performance in our emerging markets, namely, Russia, Nigeria and Belarus. In addition, our established markets showed a stable performance in the quarter despite the tough macroeconomic and trading environment.

In 2013, we accelerated both the pace and the number of countries in which we gained or maintained market share, both in Sparkling beverages and overall NARTD. We achieved the best-ever volume shares in Sparkling category in 12 of our markets. We grew currency neutral net sales revenue per case for the 10th consecutive quarter, while continuing to address affordability. Our continued focus on tight operating expense management led to a strong reduction in our OpEx as a percent of net sales revenue. I am particularly pleased with our growth in our EBIT, our margins and our EPS, marking 2013 as the margin inflection year.

For the first time in the group's history, we have delivered a negative working capital at the end of 2013. This is the result of our consistent efforts over the past few years. The effective combination of operational expense and working capital management resulted in an impressive free cash flow growth.

Michalis will now provide you with details on our financial performance in the fourth quarter and the full year, as well as the key financial guidance elements for 2014. Then, I will discuss our top line performance, as well as our strategy and the outlook for 2014.

Michalis Imellos

Thank you, Dimitris, and hello, everyone. In line with our practice, as I take you through our financial results for the fourth quarter and the full year periods, I will refer to comparable figures which exclude the impact of restructuring costs, the mark-to-market valuation impact of commodity hedges and specific nonrecurring items.

As Dimitris pointed out, we grew our volume by 1% in the fourth quarter, despite the challenging macroeconomic and trading conditions across our territories. This limited the full year decline to 1%. Net sales revenue declined by 2% in both the fourth quarter and the full year, solely due to the significant negative currency impact, particularly in our emerging market segment. Our operating expenses continued to improve year-on-year for both periods under review. In the fourth quarter, the improvement in operating expenses, as a percentage of revenue, more than offset the contraction in gross profit margin, leading to an improvement in the operating profit margin. This margin expansion reflects our improved operational efficiency across our business.

The benefits from our revenue growth initiatives and increased volume, combined with the improvement in operating expenses, more than compensated for the unfavorable currency movements and higher input costs. As a result, comparable operating profit reached EUR 68 million in the quarter, posting a EUR 12 million increase. For the full year, the comparable operating profit margin improved by 20 basis points to 6.6%. Comparable operating profit marginally increased year-on-year, reaching EUR 454 million.

For the full year, our comparable earnings per share were EUR 0.81, up 4% year-over-year. In the fourth quarter, we generated EUR 68 million of free cash flow, supported by tight working capital management and increased profitability. In the full year, free cash flow reached EUR 413 million, an increase of EUR 71 million or 21% year-on-year on a combination of improved working capital, lower capital expenditure and favorable impact from tax payments.

Let's take a closer look at our top line performance during the fourth quarter, focusing on the evolution of currency neutral net sales revenue per case, which increased by 0.9% in the fourth quarter and by 1.1% in the full year, in line with our expectations. In our established markets, currency neutral net sales revenue per case declined by 4.3% in the fourth quarter, while for the full year, it declined by 1.2%. Benefits from favorable category mix were more than offset by adverse price/mix.

Developing markets posted the biggest sequential improvement in currency neutral net sales revenue per case, increasing by 3.4% in the fourth quarter. The increase was driven by favorable pack, price and category mix. For the full year, currency neutral net sales revenue per case was up 0.8%. The emerging markets segment remained the main growth driver, with currency neutral net sales revenue per case increasing by approximately 4% in both reporting periods, driven by favorable price, category and pack mix.

Turning to input costs. Currency neutral input costs per case grew by 1.6% in the fourth quarter and 0.9% in the full year, in line with our previous guidance of low-single digit, year-over-year growth in 2013. Looking at the key quarter 4 drivers, higher EU sugar cost, as well as increased PET and sparkling contribution in the mix, more than offset lower white sugar and aluminum prices. And once again, our revenue growth initiatives enabled us to fully offset total input costs in absolute terms.

Comparable operating expenses, as a percent of net sales revenue, continued to improve this quarter, declining by 130 basis points year-on-year and contributing to the full year reduction of 50 basis points. The improvement in the quarter was primarily attributable to reduced sales, warehousing and distribution expenses. This reflects the benefits of our ongoing restructuring initiatives, as well as our ongoing route-to-market transformation efforts, leading to better operational efficiency across our business.

On a segmental basis, the main contributors were the established markets, which improved by approximately 260 basis points, as well as the developing markets, which improved by 220 basis points. In our emerging markets, comparable operating expenses, as a percent of net sales revenue, marginally increased, primarily driven by Russia's increased year-on-year sales and marketing expenses in relation to the Sochi Winter Olympic games, as well as Nigeria's higher logistic expenses.

Turning to comparable operating profit, in the fourth quarter, we achieved growth in all of our reporting segments, so let me give you some more color on this. Overall, the benefits from our revenue growth initiatives, higher volume and lower operating expenses, more than offset the accelerated negative impact from currency movements, mainly from emerging markets, as well as the slightly higher input costs. As a result, comparable operating profit increased by approximately EUR 12 million in the fourth quarter and by EUR 1 million in the full year, leading to a comparable operating profit of EUR 68 million and EUR 454 million, respectively.

Turning to the performance of our 3 segments in the quarter. Our established markets improved by approximately EUR 1 million. Benefits from our restructuring initiatives and tighter operating expense management more than offset the negative price/mix. Our developing markets improved by EUR 5 million, primarily driven by lower operating expenses and improved price/mix, which more than offset the impact of the volume decline.

Our emerging markets improved by EUR 6 million. The benefits from our revenue growth initiatives and higher volume more than compensated for the adverse currency impact, mainly in Russia and Belarus, as well as the higher input costs and higher operating expenses.

In the fourth quarter, we accelerated the implementation of certain restructuring initiatives. As a result, we incurred restructuring charges of EUR 31 million, mainly in established markets. For the full year, restructuring costs amounted to EUR 56 million as we pursued some additional restructuring opportunities towards the year-end. Total benefits from our 2012 and 2013 restructuring initiatives reached EUR 57 million within 2013.

We have identified further restructuring opportunities for 2014, which are expected to cost approximately EUR 35 million, with the expected annualized benefits reaching EUR 25 million from 2015 onwards. Given the above, we expect that the total benefits from 2013 and 2014 initiatives will reach EUR 33 million in the full year of 2014.

We continue to generate solid free cash flow growth and deliver working capital improvements. In 2013, for the first time in the group's history, we delivered negative working capital as a result of our consistent efforts over the past several years. The majority of the improvements came from receivables reduction, as well as inventory improvements. As a result, we reduced working capital in the full year by EUR 98 million, following an EUR 84 million reduction in 2012. This led to a EUR 14 million contribution to the full year free cash flow growth of EUR 71 million. In the fourth quarter, we generated free cash flow of EUR 68 million, EUR 89 million higher than the prior period. In the full year, as I mentioned earlier, free cash flow increased by EUR 71 million or 21% to EUR 413 million. This was driven by the working capital improvements, as well as lower net capital expenditure and favorable tax payments impact.

Let me now touch upon the financing of our business. Looking ahead into 2014, we expect that our successful refinancing in June 2013 at very competitive rates, as well as the reduced level of gross debt from 2014 onwards following the repayment of the September 2013 and January 2014 bonds will result in annual savings in our financing costs of approximately EUR 18 million. Overall, we remain committed to maintaining a conservative and diversified financial profile, translating to a net debt to comparable EBITDA ratio in the range of 1.5x to 2x. Our net debt to comparable EBITDA ratio closed at 1.9x at the end of 2013, down from 2.1x at the end of 2012.

Looking to the year ahead. Based on current trends across our territories, and despite persistent challenges in some of our key countries, we expect currency neutral net sales revenue per case to continue to grow year-over-year at a higher rate than 2013. We expect a stable input cost environment for 2014, with currency neutral input cost per case remaining broadly flat year-over-year. Within this, increased PET prices and higher aluminum total costs are expected to offset lower average sugar prices.

In terms of currencies, taking into account the performance of our hedged positions and our latest forecasts, we anticipate the negative impact from currency movements in 2014 to be significantly higher than the EUR 32 million negative impact incurred in 2013. We are closely monitoring the recent currency volatility, especially in the emerging markets.

Due to the evolving mix of profitability in our country portfolio, we now expect a comparable effective tax rate shift to the 24% to 26% range. Our annual net capital expenditure over the medium term is still expected to range between 5.5% and 6.5% of net sales revenue. We expect that increased operational efficiency, as well as further improvements in working capital will support solid free cash flow generation in the midterm. During the 2013 to 2015 3-year period, we continue to expect to generate cumulative free cash flow of approximately EUR 1.3 billion.

And with that, let me now pass the floor to Dimitris, who will give you some more color on our operational performance in the quarter.

Dimitris Lois

Thank you, Michalis. Now, allow me to take you through the top line developments in significant strategic areas of our business. Overall, volume increased by 1% in the fourth quarter, following a 2% increase in the same period last year. The established markets were stable this quarter, following 9 consecutive quarters of volume decline. We are pleased to have seen the improving volume trends in the segment and at the same time, remain cautious as the macroeconomic and trading environment remains difficult.

The development markets performance turned negative this quarter, cycling a 1% increase in the prior year, reflecting our strategic choice to focus on sustainable value-accretive volume in certain markets and the ongoing volatility in the segment.

Volume in the emerging markets grew by 4%, cycling an 8% growth in the same period last year. We continue to experience varying trend levels of performance in the segment. This quarter, the strong performance in Russia, Nigeria and Belarus more than offset the volume declines in Ukraine, Romania and Serbia.

We are leaders in the sparkling beverage in 23 out of 24 markets, and we continue to improve our leadership position in the majority of our countries. Specifically, in the full year, we grew or maintained our volume and value share in Sparkling beverage category in 20 out of 24 of our markets, including most of our key markets, while we gained or maintained value share in the overall nonalcoholic ready-to-drink market in 18 out of 24 of our markets. More importantly, in the year-end, we reached out our best-ever Sparkling volume share in 12 of our markets.

Sparkling beverages grew by 1% in both the quarter and the full year. Trademark Coca-Cola products were once again the oxygen of our business, growing by 2% in both periods. This reflects growth in both Coca-Cola Regular and Coca-Cola Zero, which grew across all 3 reporting segments. Our Energy brands continue to grow by 6%, marking the 15th consecutive quarter of volume expansion in this category. The positive performance in the fourth quarter was driven by strong growth in Russia, Hungary, Czech, Italy, Romania, Ireland and Serbia. Ready-to-drink tea products declined in both periods, following a 4% growth in prior year. The decline reflects negative performance across all segments with Russia and Austria being the key growth drivers.

Volume in the Juice category improved by 6%, with volume expansion across all segments, driven by strong growth in key countries such as Russia, Belarus, Romania, Hungary, Poland and Ireland. As a result, our full year volume in the category grew by 1%.

Volume in the Water category was stable in the quarter, supported by strong performance in the emerging markets segment. Nigeria and Belarus were the key incremental growth drivers. Overall, Italy, Ukraine and the Czech Republic continued their negative performance, reflecting both our strategy to rationalize our SKU, as well as the overall trends in most of these markets. In line with this strategy, package mix in the category improved for the 12th consecutive quarter across all segments.

Turning now to each of our reporting segments. Volume in our established markets segment was stable in the fourth quarter. In Italy, the overall volume decline in the quarter was mainly driven by Water. Sparkling volume grew in the quarter. In the full year, we have gained both volume and value share in Sparkling beverages and value in the overall NARTD.

Looking ahead, we remain cautious and expect 2014 to be another challenging year for Italy, particularly in view of the record-high unemployment and the continued pressures in disposable income. Our strategy is focused on winning in the marketplace by increasing the points of interaction we have in each outlet, addressing affordability, controlling costs by exploiting systems, optimizing infrastructure and strict working capital management.

In Greece, the rate of volume decline continued to moderate in the fourth quarter. Juice and Water were the key category outperformance following more than 15 consecutive quarters of decline. In the full year, we outperformed the market and grew our volume share in Sparkling beverages category. Going forward, we need to be mindful that 2013 was the fifth year of volume decline in Greece, yet disposable income is expected to decline further in 2014, while unemployment remains at record high and is expected to peak in 2014. As a result, we remain focused on addressing affordability, winning in the marketplace and improving operational efficiency.

In Switzerland, volume grew across most key categories. In Sparkling beverages, Coca-Cola Zero grew by 5%, while Fanta grew by low-double digits, supported by increased activation and improved distribution. Our focus for Switzerland is to drive key customer collaboration plans, while accelerating outlet execution and distribution by implementation of our route-to-market optimization initiatives. Our strategy in established markets is to protect net sales revenue per case while addressing affordability. We are also continuously looking into improving efficiencies and optimizing our cost base. As part of this, most of our restructuring initiatives that have taken place in 2013 and are expected to take place in '14 relate to this segment.

In our developing markets, we registered a 5% volume decline in the fourth quarter following a 1% increase in the prior year. The macroeconomic and trading environment in Central Europe remains volatile.

Our performance in Poland reflects the tougher comparables, as well as our strategic decision to focus on sustainable value-accretive volume in an environment which is highly driven by discounters. We will continue to focus on our OBPPC implementation to strengthen our net sales revenue per case, while also driving operational efficiency and maintaining a tight cost control.

Hungary maintained a downward trend, albeit at a lower pace, mainly due to improved performance in our Energy, Juice and Water categories, with the latter 2 cycling strong declines in the comparable prior-year period. In 2013, we became market leaders in the Juice category, while we maintained our volume share in both Sparkling beverages and NARTD. Overall underlying trading conditions remained tough as unemployment remains at double-digit levels, while consumer confidence is among the lowest in the European Union.

In Czech, the volume declined by mid-single digits, predominantly driven by declines in Water. Coca-Cola Zero grew by strong double digit, while Energy grew by mid-single digit, reflecting the strong performance of Burn. Overall, package mix improved in our development markets in the fourth quarter, both in the Sparkling and in the Water category. This reflects our continued focus on OBPPC implementation in the segment as a tool to address the market and consumer dynamics.

Volume in our emerging markets segment grew by 4% in the fourth quarter, cycling an 8% increase in the prior-year period. Strong performance in Russia, Nigeria and Belarus more than offset the volume decline in Ukraine, Romania and Serbia. Volume in Russia was exceptionally strong, cycling a very tough comparable of 16%. We delivered growth in all key beverage categories, with the exception of Water.

The fourth quarter result in Russia was supported by our flawless execution of the Olympic Torch Relay, strong Christmas activation and ongoing OBPPC execution. Looking ahead, we continue to expect Russia to grow at a moderate pace compared to the trends seen in Q4. As the macroeconomic growth continues to decelerate, we expect this to continue to filter through to consumers as reflected by the decline in consumer confidence and the slower pace of growth in the overall NARTD markets since the beginning of the year. In the full year, we gained volume and value share in both Sparkling category and NARTD.

Volume in Nigeria continued to grow strongly, building on the positive momentum of previous quarters and leading to the best volume growth in 10 years. Growth in the fourth quarter was driven by our strong activation, as well as improved availability in a seasonally strong quarter. Trademark Coca-Cola products grew by 12%, while Water grew by strong double digits, supported by our new PET capacity. We continue to execute on our strategy in the country, focusing on expanding further distribution and volume per outlet of our core brands, driving availability across-the-board and finally, selectively introducing OBPPC initiatives.

Romania declined by low-single digits, with the pace of decline decelerating in the fourth quarter of the year. Volume declined in all key categories with the exception of Juice, which was supported by the launch of Cappy Pulpy. Overall, we remain cautious as domestic demand and consumer confidence remain under pressure. In the full year, we continued to outperform the market, gain volume and value market share in both Sparkling and overall NARTD.

In closing, I would like to reiterate that we remain committed to strengthening our business and manage it for the long term, with a focus on investing in our brands. In 2014, we expect a challenging macroeconomic and trading environment in most of our territories. In the emerging market, there is currently limited visibility on the potential impact of the recent financial and macroeconomic events and how this will filter through to the real economy.

Looking at fourth quarter of 2013, we are encouraged to see that the initiatives we implement throughout the year decelerated the negative group volume trend.

Before I open the floor to questions, I would like to highlight that we have a strong track record of returning value to our shareholders. To this end, for the financial year 2013, we will seek shareholder approval for EUR 0.354 dividend per share. This represents a 4% increase, in line with our progressive dividend policy.

And with that, Michalis and I are ready to take your questions. Operator?

Question-and-Answer Session

Operator

[Operator Instructions] Your first question today comes from the line of Nicolas Ceron of SocGen.

Nicolas Ceron - Societe Generale Cross Asset Research

Coming back on your outlook for 2014 on the input costs, I mean, we see the sugar prices going down significantly in the world and in Europe, and yet, you don't seem to benefit from that. Could you maybe explain to us as to why that is the case, and if you have any contract that will run out through the course of the year? And maybe a second point, I think you mention in the press release an increase in the incidence rate for the concentrate. Is there anything unusual here or is that just a normal price increase with the mechanism of incidence?

Michalis Imellos

It's Michalis here. I'll start with the input cost guidance, and then Dimitris will give you some more background on the incidence increase. So, when it comes to the input costs, currency neutral per case in 2014, as we've said, we see them broadly stable. It is true that on the sugar front, we see improvements year-over-year. So, starting with EU sugar, we see a high-single digit decline in 2014 and that is very much linked with the announced abolition of the EU quota, sugar quota in 2017. And we have a very strong coverage for EU sugar. We are more or less fully covered for 2014, so there is good visibility there. In terms of world sugar, the expectation is for prices to be flattish year-over-year, taking into account also our hedged positions. In Russia, we are fully hedged for 2014. And for Nigeria, we have covered around 80% of our needs. So there, we are also quite comfortable in terms of the trends. Where we see increases is, first of all, on PET, we see a mid-single digit increase for 2014. Bear in mind also that there is a mix of dollar and euro purchases in our countries in terms of resin. Some countries buy in U.S. dollars, some countries buy in euros. And as you know, PET, we cannot hedge, so there is some uncertainty and some volatility for 2014 in this area. And finally, in aluminum, we do see a slight decline in the aluminum price, but we do experience higher conversion costs as we exit longer-term contracts. And the combination of the 2 is going to drive a small single-digit increase overall in aluminum total cost in 2014. So the combination of those 4 major raw material factors will drive the broadly stable input cost per case on a currency neutral basis. That is excluding concentrate because, consistently, we quote input cost excluding concentrate.

Dimitris Lois

Nicolas, this is Dimitris. On your second question, just to give you an order of magnitude, the total impact at group level is approximately 0.5% of net sales revenue. And we will implement price initiatives that fully mitigate this incidence increase. Obviously, these price initiatives are going to be consistent with our OBPPC strategy.

Nicolas Ceron - Societe Generale Cross Asset Research

But does that mean that basically your contract -- I thought the increase of the concentrate price was like the incidence model, was a formula that would give you automatically the concentrate price. Has this formula been changed? Is that why you're flagging or is that just that a normal formula being applied?

Michalis Imellos

Yes. Effectively, there is a percentage of sales revenue which is the incidence, and this percentage has been increased. The overall increased impact is, as Dimitris said, 0.5% of the total net sales revenue.

Nicolas Ceron - Societe Generale Cross Asset Research

Okay. And I guess this has been increased when you renewed the 10-year contract or 15-year contract with Coke for your territories, is that right?

Dimitris Lois

No. These are 2 different things. I mean, we have renewed, as you very well pointed out, until 2023. And we have, as of January 1, 2014, this incidence increase that, I have said with you, which is the 0.5% on net sales revenue.

Nicolas Ceron - Societe Generale Cross Asset Research

Okay. And just coming back on the sugar, if I may, would that be fair to assume that if the spot prices remain the same, you would have a material benefit to your input cost in 2015?

Michalis Imellos

We do expect also a small improvement based on where we are at the moment and the prices that we can see. It's too early, obviously, to call how big the improvement is. We are also, clearly, not fully hedged yet for 2015. But directionally, yes, we do expect an improvement.

Operator

Your next question comes from the line of Adam Spielman of Citi.

Adam Spielman - Citigroup Inc, Research Division

Yes. Can I ask, I think, 2 maybe 3 questions? To start off, following up on the question on input costs and concentrate, when you say that currency neutral input costs are roughly flat, should I be thinking about that, I guess, in euro terms, or should I be thinking about that in ruble terms for Russia? And I suppose talking about -- to give an example, if world sugar, you're saying, is roughly flat, if it's flat in dollars, maybe the price has gone up in rubles, but also maybe you've hedged it. So can you clarify that? Secondly, on the concentrate, again, a follow-up on that, do you have -- do you know now if the price of -- if a percentage of price of the incident rate for concentrate pricing will rise again in 2015 and beyond? And then finally, are you able to expand a little bit on the outlook for Nigeria? Some people are saying that as the government prepares for the election, that will stimulate demand; others are saying different. So if you could just give us a bit of color about how you see the Nigerian outlook, that would be great.

Dimitris Lois

Okay. I'll take your second and the third question. No, we are not aware of any additional incidence increase, so that covers the concentrate price increase. Now, Nigeria, the -- what we see in the market is a market that is growing. Yes, there are elections. Elections currently are for May 2015. So, in my personal view, I don't believe that this drives what we have seen in the market in 2013. And also, we are very optimistic for 2014. And with that, let me pass to Michalis to cover your first question on your input cost.

Michalis Imellos

Adam, the -- what we quote is input cost per unit case, currency neutral. So it is in euros, the input cost per unit case, and it is on a like-for-like currency base as in 2013. So, to that, you would need to apply the potential volume change, increase, decrease, or whatever. And then, on top of that, put the incremental ForEx impact that we will have in 2014 versus 2013. But what we quote here is the input cost per case in euro terms, currency neutral.

Adam Spielman - Citigroup Inc, Research Division

That's very clear on all 3 answers, but if I can follow-up on that. As you look at spot rates, as they are today, clearly, I think what you've said, if I do understand it correctly, is that as the ruble falls and some other currencies, that has an adverse transaction effect. Are you able, in any way, to quantify what you think that is, assuming spot rates continued where they are?

Michalis Imellos

So, yes, one would have to take, obviously, into account a number of factors like, for example, the mix of the currencies, the level of hedging that we have already done and so on and so forth. But if I was to look overall at the ForEx impact, which we quoted as being significantly higher in 2014 versus '13, I would say that right now, we are in a situation where things are very volatile still. I believe it is too early to project fully what is happening right now for the remainder of the year; we have to see how things unravel in the emerging markets. Having said that, the hedges that we have already taken in the rates before the crisis, the emerging markets currency crisis, I would say can see us until the end of April, mid-May. So, until then, we continue to benefit from the hedges that we have already taken before the currency crisis. Now, obviously, if these rates continue beyond that, and bearing in mind that according to our hedging policy, we do have a rolling activity of hedges, clearly, the impact versus what we have seen in 2013, the EUR 32 million, is going to be very, very high. So what very high is, I would say that it can be a range that can swing from 60% in the best of the cases, all the way up to 120%. So it's very early to quote something with, let's say, reasonable certainty. We will come back in May after our quarter 1 results and give some further update on how ForEx is progressing.

Adam Spielman - Citigroup Inc, Research Division

Okay. Can I -- sorry to keep on pressing you. When you say it can swing between 60% and 120%, 60% and 120% of what? I didn't quite understand that.

Michalis Imellos

Of the EUR 32 million hit that we had in 2013.

Adam Spielman - Citigroup Inc, Research Division

Okay, that's very clear. Sorry to keep on pressing.

Michalis Imellos

Adam, that's the extra, okay, clearly. It's not -- it's going to be more than 2013.

Operator

Your next question comes from the line of Edward Mundy of Nomura.

Edward Mundy - Nomura Securities Co. Ltd., Research Division

Just coming back to the incidence rate, just so I understand it fully, the 0.5% that -- of that extra sort of pricing that you acquire, equates to an incidence increase of between 2% to 3%, is that right?

Michalis Imellos

No, it's the impact, the absolute impact, the euro impact, Ed, is going to be, is estimated to be 0.5% of net sales revenue. So something like EUR 40 million, let's say.

Edward Mundy - Nomura Securities Co. Ltd., Research Division

Okay. So what's the actual increase in the incidence rate itself?

Michalis Imellos

You cannot measure it like this because it applies to specific countries and specific brands, so it's -- there isn't one specific increase across-the-board. We just converted the equivalent increase just for the ease of your calculations.

Edward Mundy - Nomura Securities Co. Ltd., Research Division

Okay. And is this specific to Coca-Cola Hellenic, or do you think this is an issue for other bottlers as well?

Dimitris Lois

No. Ed, we don't know about other bottlers. That, I mean, we just talk about ourselves.

Edward Mundy - Nomura Securities Co. Ltd., Research Division

Okay. And I mean you flagged 2013 as a margin inflection year. I mean, if -- we know the impact of the increased pricing you acquired to pass on the incidence increase. You flagged that input cost is going to be neutral in euro terms. I mean, if the currencies do move against you and you have a negative transaction impact, are you still confident you're going to be able to get your margins up in 2014?

Dimitris Lois

Well, that's what we have been focusing on all the elements, Ed, that we control, starting from volume, going to the revenue per case, FX-neutral, which is going to grow higher than this year. From single-digit negative to flattish, we will continue our operating expenses and take cost out. So all the things that we control, we are very optimistic. Eventually, we are also optimistic about the margin. And the disclosure here is we don't know at this stage because it's very early in the year how the overall FX will evolve.

Edward Mundy - Nomura Securities Co. Ltd., Research Division

Sure, very clear. And you flagged 2013 as the margin inflection year. Do you think it's also the volume inflection year, given some of the improvement you saw in Q4?

Dimitris Lois

We were very happy to see Q4, Ed. And at this point, what we expect is the overall total group volume to have a deceleration of the negative trend. We closed the year with minus 1%. Our expectation overall is to see at 2014 decelerating this negative trend.

Edward Mundy - Nomura Securities Co. Ltd., Research Division

Okay. And just finally on your free cash flow, you've had much stronger cash conversion. Do you think you're going to be able to generate positive working capital in 2014 as well?

Michalis Imellos

We are hoping for negative working capital, Ed. But I guess, you mean that whether we will be able to continue to contribute positively in the cash flow as a result of the negative working capital and, yes, the expectation is to have further improvements. Clearly, as we enter the negative territory of working capital, those improvements will diminish inevitably. So, in the future years, we expect more contribution from the profitability, but also contribution from the working capital.

Edward Mundy - Nomura Securities Co. Ltd., Research Division

And just one final question on the cash. I think you disclosed that within your CapEx, you've reduced the marketing equipment as a portion of total CapEx from 26% down to 20%. I presume that's coolers. Is that sort of an ongoing run rate, that 20%, as a proportion of your overall CapEx?

Michalis Imellos

Not much changes in terms of our focus on investing behind revenue-generating activities. We are complacently at around 70% of our CapEx, going towards revenue-generating activities. And that's coolers, production lines, new infrastructure and so on. So nothing changes there.

Operator

[Operator Instructions] Your next question comes from the line of Olivier Nicolai of UBS.

Olivier Nicolai - UBS Investment Bank, Research Division

I've just got 2 questions. First of all, on Poland. Volumes declined by high-single digits in Q4. Could you just give us a bit more color on this? And do you think you are losing share in the market versus private labels for instance? And the second point is on your COGS in Nigeria. I know you don't disclose by country, but could you have an idea of what the percentage of your COGS is in local currency versus euro or dollar?

Dimitris Lois

On Poland, a couple of things. The first is that we have seen in Q4 the market suffering. And I'm saying that because, overall, we see on Sparkling, which was the category that suffered the most, negative mid-single digit, which was not what we were seeing the previous quarters. So the first thing is the overall market. The second thing is that we have been cycling a strong Q4 last year. And the third element is behind our focus and our decision on sustainable value-accretive volume, and that's particularly in Sparkling, in an environment where it's highly driven by discounters. So those are the 3 reasons behind what you have seen in Q4 in Poland. And I'm going to turn to Michalis for your question with regards to Nigeria.

Michalis Imellos

Yes. Olivier, we -- as you said, we don't give specific details of the mix in the COGS by country. But the general rule is that concentrate is -- you should think of it in local currency because it's a percent of net sales revenue. When it comes to sugar, PET and aluminum, in the majority of the markets, these are foreign currency exposures, unless there is real local produce where you can buy locally.

Operator

Your next question comes from the line of Gabriela Malczynska of Barclays.

Gabriela Malczynska - Barclays Capital, Research Division

Can I just ask a couple of questions, first one on the -- your bottling contract with Coke? So you said it's expiring in -- it was extended until 2023, but is there a possibility of the incident rate change in between those years, or is that going to be fixed until 2023?

Dimitris Lois

Yes, you're absolutely right. First of all, it's extended until 2023. As far as the incidence is concerned, that's something that The Coca-Cola Company decides, so we don't know, what's going to be...

Gabriela Malczynska - Barclays Capital, Research Division

So it can change?

Dimitris Lois

It can -- yes. Yes, it can change, because there it is, it's their decision.

Gabriela Malczynska - Barclays Capital, Research Division

Okay. And then on Russia, could you just maybe elaborate whether there is any -- you can see any change in the market share between different categories, whether there is any share-taking from beer given all the kiosk closures?

Dimitris Lois

Okay. First of all, it has been an excellent quarter for us. And this is the 13th consecutive quarter that we grow share and I'm focusing around Brand Coca-Cola and, obviously, also a very strong quarter with regards to growth on flavors: Fanta, Sprite and Schweppes. Juice has been doing fantastically well, so, all in all, a very good quarter. Cycling, a very strong quarter last year, so the 2-year growth is above 20%. With this in mind, we have been following closely the changes in the beer legislation. Medium term, yes, we do expect that we will be having a benefit out of that. At this point of time, we have seen, especially this year, closures on kiosks, which we expect will moderate next year. So the point is that, yes, we do see benefits of consumers shifting to our brands. This is something medium term, so we haven't captured any real benefit yet. That's the answer, Gabriela.

Gabriela Malczynska - Barclays Capital, Research Division

Okay. And the last one on the tax rate because there's an increase versus the expectation, could you maybe elaborate on that? I understand it's a country mix, but could you give more flavor on it?

Michalis Imellos

There isn't very much to add, Gabriela. It's the mix of countries is changing. As Dimitris highlighted, the trends in terms of the decline of decelerating the established markets, so this obviously helps in terms of the mix of profit into the overall group. And looking at the overall mix, we believe now there is a slight shift in the effective tax rate.

Operator

Your next question comes from the line of Costas Theodorou of NBG Securities.

Costas Theodorou - National Bank of Greece SA, Research Division

I have one question with regards to your expectation from -- for the contribution of The Coca-Cola Company regarding marketing and promotional activities for 2014. Do you see any significant change versus the past? I have the numbers from 2010 to 2012, and if you can tell me, what's the number for 2013? That's my first question. And my second question is with regards to your -- the impact of currencies, how would be the split as things stand now between transaction and the impact from the currency on the countries, in transformation, I mean?

Dimitris Lois

Costas, on your first question with regards to the marketing from The Coca-Cola Company, our expectation is that it's going to be close to what we have seen in 2013 and definitely in line our key strategic priorities behind the brands. And with that, let me shift to Michalis for your FX question.

Michalis Imellos

Yes. Costas, we expect that the translational impact, so translating local currencies to euro for reporting purposes, will be pretty much similar or even -- could be even better in the good scenario than 2013. The major, major impact from the increase in the ForEx that we see in 2014 is coming from transactional.

Operator

Your next question comes from the line of Henry Davies of the Bank of America.

Henry Davies - BofA Merrill Lynch, Research Division

I've got 3 questions, please. Firstly, can you make any comments on trading so far in the first quarter? It seems like there must have been quite a pickup in November, December given you cautioned a difficult start to the quarter at the 3Q stage. Secondly, on the price of concentrate, I believe you said it was a 0.5% impact in euro terms. If we put that into local currencies, I guess the impact is different. Can you tell us what that would be? And then lastly, on margins, the outlook into '14, I mean, if we avoid trying to forecast what the currency does from here, we assume current spot stays for the remainder of the year. Can you really get margins up in '14? On my quick math, it looks like you're facing a minus 50-plus bps headwind from transactional FX and, at the same time, you've told us that volumes are still expected to be slightly down. So if you can get margins up, what would drive that?

Dimitris Lois

Okay. Let me -- Henry, let me take your first question. First of all, as you know, Q1 is a very small quarter in volume. So, obviously, given the seasonality in our business, I don't believe that Q1 is indicative. With this, I would like to give you a bit more color overall in 2014. I think it's clear that the expectation on challenging both macro and trading environment is there. Unemployment and disposable income are getting deteriorated. So, with this in mind, and obviously with what we have seen in the last quarter of 2014 -- of 2013, first of all, we believe that, overall, established will decelerate the decline in volume and established are the most profitable of the 3 segments. In developing, we don't really see much of a difference in how they will do in '14 versus what they have been doing overall in '13. And then obviously, the key growth driver is going to be emerging. Now, in emerging, if we could split into 2 big pillars, one, including Nigeria and Russia, we are very optimistic on Nigeria. And with regards to Russia, we believe that Russia is going to grow at a moderate growth rate versus Q4. We are focusing very closely, obviously, the FX developments and how the FX developments will filter through, if those continue because it's only February. And then we have another pillar which is the 3 countries that have been suffering the most and we have seen that in Q3, and that's Romania, Ukraine and Serbia. We have seen an overall improvement there, and we expect overall that we're going to see a moderate improvement in the rate of decline in those 3 countries. So that's why we are optimistic overall. So that eventually concludes in having the group next year on a decelerating mode of the negative volume trend that we have seen this year. And with this, let me pass to Michalis to give you a bit more color on your concentrate and your margin question.

Michalis Imellos

Henry, first of all, on the concentrate, 0.5% of NSR is the straight measure. As I said earlier, concentrate is calculated -- the concentrate price is calculated on the local currency revenue. So no matter how revenue evolves in terms of the different exchange ranges, it will always be 0.5%. So that doesn't change, whether it's euro or something else. In terms of your third question, I think we have given some guidance in terms of the revenue expectations that currency neutral revenue per case is to grow at a higher rate than 2013. The input costs, broadly flat; on a per-case basis, currency neutral. Certainly, you have to add to the total cost the impact of the concentrate increase because it's not part of this input cost guidance. We have more restructuring actions for 2014. We expect another EUR 35 million of restructuring costs which will generate incremental benefits of EUR 33 million in 2014. And, of course, we continue with the strong, tight OpEx management. So we do expect further improvements as percent of revenue in 2014. And against all this, certainly, we have the significant currency headwind which we discussed. Taking all this into account, clearly, 2013 will not be the only year of inflection; we want to continue with profit margin growing also in '14.

Henry Davies - BofA Merrill Lynch, Research Division

Okay. If I could ask one quick follow-up. Within those 2 buckets in emerging markets, Russia and Nigeria versus the others, what is the margin differential between those 2 groups, if you could?

Dimitris Lois

We don't provide margins per country, Henry.

Operator

There are no further questions at this time. Speakers, please continue.

Dimitris Lois

Before my closing comment, I would like to say a very big thank you to Oya for all her contributions in the last 3 years and wish her, in her new role as a Treasury Director, all the success.

I want to thank you for joining us today and for all the questions that facilitated a good discussion around our fourth quarter and full year performance.

As a final remark, let me reiterate that we are confident that we have the right strategy to successfully respond to the challenges in the marketplace. We continue to focus on the elements we can control, becoming stronger, leaner and more efficient. This is our strategy. It's clear, and we know that when executed with excellence, it works: winning at the point-of-sale every day and in every occasion; growing currency neutral revenue per case consistently, while continuing to address affordability; cost leadership in every aspect of our business, as we work on improving efficiencies and optimize our cost base; and finally, focusing on working capital improvements and continuing to generate strong free cash flow.

Thank you. And we look forward to speaking with you again very soon.

Operator

Thank you. That does conclude the conference for today. Thank you for participating. You may all disconnect.

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